from Judith: Types of Film Financing [16 points for talk on May 3]

here is the document describing the topics that Judith will be covering on May 3...

 

TYPES OF FILM FINANCING

1. Studio Financing: The studio is responsible for 100% of the financing, overages, and enhancements. The studio looks to the market potential for ROI. Studios produce high budget, star driven films with international
appeal and possibilities for vertical and horizontal integration plus sequel potential.

2. Equity investment: Equity investors are owners - they own either the copyright or the right to revenue, or both. Equity investors analyze the potential of the film to make money in the marketplace to determine the possible ROI.

3. Debt equity investment: Same as 2 above except that the investment must be repaid on an installment schedule ether from a film's revenue or the borrower's other financial assets.

4. Bank financing: Banks lend money against collateral analyzing the value of the collateral. When banking paper, the bank checks the creditworthiness of the issuer of the paper.

5. Negative pickup: Usually bank financed with the collateral being a negative pickup agreement from a major studio.

6. Gap financing: Bank financing for a negative pickup in which there is insufficient collateral for the loan.

7. Split Rights deal: Bank financing of a negative pickup with two distributors - one buying domestic rights, and the other buying international rights. The collateral is two negative pickup agreements, one from each distributor.

8. Pre-sales: Bank financing in a variation on a negative pickup in which distribution rights are sold territory by territory resulting in multiple pre-sales that are used as collateral for the loan.

9. Line of credit: A line of credit is a loan from a bank to an established business that has a positive net worth and a sufficient asset base. The main purpose of a line of credit is to manage cash flow of a company.

10. Slate Financing: Financing provided generally by hedge funds, investment companies, or financial institutions to a studio for the production of a slate, or group, of films. The financier is seeking ROI from
revenue generated in the marketplace and the films are cross- collateralized for purposes of calculating recoupment of investment plus a profit.

11. Super gap financing: Generally bank financing with about a 20% gap plus private financing to cover up to an additional 50% gap subordinated to the bank's position for repayment.

12. Coproduction: This term is used two ways, (i) A film for which two studios furnish the production financing, usually 50/50 of the budgeted amount, and split distribution rights one taking domestic rights and the other taking international rights. One of the studios physically produces the film according to a list of mutually approved specifications, (ii) A production between two or more countries using local film subsidies to totally or partially finance production.

13. Crowd financing: Using the Internet to raise funds from the public (i.e. the masses, the crowd) for the purpose of financing a movie.

14. Soft money: Tax credits and subsidies made available to aid film production. Tax credits are available in many states in the US and in some European countries, and subsidies are available in some international countries and territories within those countries.

15. Bridge financing: Generally equity investment that is an interim loan to be repaid plus interest and an override once distribution rights are sold.

16. Product placement/goods and services: Money paid for placement of products in films/goods and services provided below market value with the balance to be paid from the film's revenue stream.

 

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